Indeed, a link to this interview should be displayed in a prominent position on this forum. I don`t think I`ve heard a better, more honest summary of what`s really going on in the UK housing market, for a long while.

The EA, MSW and FP made simple and reasoned points. So refreshing after listening to all the BS spouted by the main media in this country. The icing on the cake would have been to have Krusty Allstrop interviewed after those three. I bet she would have stuggled to get her words out, even though she hasn`t started to eat that hat, yet.

The joy of this programme was its honesty. Just plain insight & straight talking. Utterly refreshing...... & sane!

Thxs to all involved

..................................Ubi bene ibi patria

“…it is difficult enough to convince some people that the economy is in fact not providing the security they desire, but is actually destroying their future completely. To explain to them that this is deliberate, that the economy is designed to self-destruct, that is another prospect altogether…Ambrose Evans-Pritchard 25/7/2010

Here is a transcript of the first section, with the "honest John" estate agent. If I have time, I'll do the other sections later (but I probably won't).

Dominic Frisbee: So i'm talking now to John Woosley who is the manager of Lauristons in Putney. And when we spoke last June, John, things were already slower than they'd been a few months previously, you said sellers needed to be more realistic about asking prices. What's changed since then? What's it like now?

John Woosley: Well, it's as I thought. In June last year we were approaching the peak of the market. Simply, it couldn't continue. Lenders were actually lending six times a salary or a joint salary, first time buyers were getting 100% mortgages, the market level was fuelled purely on the borrowing power of people who could only just about afford their mortgages providing interest rates remained at that low level. They would only have to change, and then of course they'd be in trouble. And those with 100% mortgages would immediately start going into negative equity as the market would start to fall. And this is what's happening now, of course. I mean, the interest rates went up from 4 to 4.5%, somewhere around there, up to around about 6% - that's about a 30% increase in the cost of borrowing. And yet the only way the market would be able to continue would be if the prices suddenly dropped 30% to match it. Of course that's not going to happen. The property market doesn't seem to function like other markets - the stock market, foreign exchange, oil market or whatever - which instantly find their levels according to supply and demand. The property market doesn't function like any other market: it finds its own level - eventually. I think the reason why it takes so long to find the level, especially if it's going down, is the reluctance of homeowners to reduce their prices.

DF: That's very interesting, and I think it's kinda, people have it in their mindset, because we've had such an amazing bull market for the last 20 years or so, people have it embedded in their brains: "property only ever goes up", and they won't accept the fact that perhaps property is going down.

JW: Yeah, and it's not only the vendors or the property owners who think that, it's the agents as well. There are very few agents around today who were around at the last peak and fall in the market which was around 88, 89. And when you think then that the market started sliding and it didn't start its recovery until early 93, so it's a good four year slide downwards, and then another three years or so to come up, in fact, so I reckon it's about an eight-year turnaround just for it to get it back to the level that it was in 88. From then on it's been rising, obviously, until of course, perhaps June/July last year, where it's reached a peak. So have we got another 8-year cycle ahead of us? That's an interesting question.

DF: You lived and worked through that last slump

JW: I did, I did, yes.

DF: I remember you describing it last year. How does this one compare? It seems to have been a lot more violent.

JW: Yes it does, because I think it's affecting a lot more people, because there are more property owners. I think also the lenders were even greedier this time than last time, which is amazing - because there's been a precedent and they should have learned from that. But it's as though they were all caught up in the whirlwind of lend, lend lend no matter what. And God knows why there wasn't more control over that. And nobody seemed to pay attention to what was happening, this is the extraordinary thing. There were a few people who could predict what was going to happen. And I think you've only got to look at John Hunt at Foxtons, who obviously being very well advised and a really astute businessman himself, and nobody knew the market like he did, got out at the perfect time and sold his company for whatever it was, £390M, I mean, the company is only worth a fraction of that! Bear in mind that the value of an estate agency is only in the name, and the word, they don't own any of their sites or anything, they're all rented. I think, was it, BC corporation they're called? (laughs) God knows they must have realised their mistake by now.

DF: And are you seeing lots of estate agencies going bust, and people being laid off?

JW: Yeah, sure, you've only got to drive around and you see what were good prospering corner sites now completely closed and whited out the windows. We ourselves have actually had to mothball some of our branches. It's necessary to do that, because in order for an agency or a company to survive in this kind of climate, you have to contract. You know, you've got to survive otherwise you'll go under.

DF: I'm amazed at how quickly this has happened! I mean, it's really only in the last 9 months, it's happened so quickly.

JW: Yeah, yeah. Well, yes, it's happened quickly but it's not as though it wasn't easily predictable, it's just that nobody wanted to accept what was going to happen. But then it's like a tap being switched off. You know, if nobody's going to buy, they're not going to buy - and why should a buyer buy a property now? Why should he? You know, when the interest rates are probably pointing upwards, maybe, when everybody in the market place is telling the buyers not to buy - the media especially - and you look at first-time buyers. Where do they get their influence from, their motivation to buy? Certainly not from the estate agents, they don't really trust them. From the media! They will listen to the media, the newspapers, all the TV reports, and they're all totally, totally negative about the property market. So why should anyone buy? Why would they?

DF: So how's this going to hit buy-to-lets?

JW: Oh, it's going to hit them big time. A buy-to-let investor can hardly get a mortgage on a buy-to-let now. If they already own a property, then perhaps it's not going to be too bad, because the letting market is good. When you think of mortgages, and most estate agents will have a mortgage arm, they're not doing any business on that, they're doing very little business on the sale side, so they're relying more and more on their lettings.

DF: And is the letting market bouyant at the moment?

JW: It's good. It's what we'd expect it to be. There's a lot of property coming onto the letting markets, because if vendors can't sell and they want to move on with their lives then they will rent their property. Remortgage at God knows whatever price but remember they've probably already got substantial equity in their property so they can remortgage, and then buy elsewhere or move elsewhere or even rent. You know, they want to move out of town, they can rent their expensive property here and rent a lot cheaper out of town, if that's what they want to do.

DF: As we go forward, what's your forecast? Do you see a return to levels which are basically what people can borrow, three times earnings, basically, do you see an eventual return to those levels?

JW: Yes. When the cost of borrowing went up about 30%, I thought straight away, very simple maths, well the market should be 30% lower. And we're not there yet. It takes a long time for vendors to come to terms with having to drop their prices. The market's reduced very much to people whose lives actually dictate the move. That's where you're going to get a sale, or at least get someone who's willing to sell. The probably that estate agents have, though, is once you've got a deal put together, how long can you hold it together? You have to whizz that deal through as quickly as possible. Solicitors have really got to be on the ball. And sadly a lot of them aren't. They've become very very sleepy with less work to do. That deal's got to happen in, you know, at the speed of light, all right, before the buyer gets second thoughts and cold feet and "oh, the markets gone down", he's just read another article in the newspapers and realised he's doing the wrong thing and he pulls out. The hardest thing now is holding the pipeline business together.

DF: What do you do, if I get you in, possibly to instruct you to sell my house, and I think the house is worth half a million, and you know it's not going to sell for any more than £400,000 - I mean, how do you go about explaining that to the vendor, and still trying to persuade him to put it on with you, and not with Foxtons, or someone who's going to overvalue it.

JW: Well, there's no point in me taking on a property that I know is tremendously overvalued. They've got to listen to me. They can go on with another agent, you know, about the market level, they're simply not going to sell. And quite frankly I'd rather that they did do that, and then I can apply my time to other things, looking after my branch and my staff and actually letting property. And then I'll let the other agent waste his time and energy proving that this property isn't that value. I'll keep in touch with that potential client, give them a call every two weeks, "how's it going, how many viewings, blah blah blah", and sort of in the nicest possible way, "I told you so" sort of thing...

DF: (laughs)

JW: And when they soften a bit, I will pick it up at my price, but by then of course, and I'll be probably warning them of this, it'll be even lower than when I originally valued. And this is a core mistake that a lot of vendors make when the market's going down. It's like the tide going out, and they can get left on the tide-line, you know, on the high water market. They mustn't just simply chase the market down. They've got to be ahead of the market going down, just as they are ahead of the market going up, when they put the property on the market, doesn't matter if it doesn't sell straight away, because the market will rise to that higher valuation and they'll get their property - when it's going down the other way they've got to do the same but in reverse. You've got to be lower than the market. Or at least at that market level, to catch the buyer quickly. If you go on at the market level you will be competitive with the other properties. And yours will go before the others. And then, like I said, the agent's got to whip it through.

DF: And what sort of properties are selling best and worst at the moment? Flat? Houses?

JW: The houses are very difficult to sell right now. Depends on the area, of course, but generally speaking. The chains, now, are weaker than ever, for all those reasons we've already discussed. So probably the prime properties to sell are the investment ones where people think they can buy something and actually make money on it, or lock it away for a long term. In markets like this, properties that have down factors are usually the ones that suffer most. By down factors - I mean properties above commercial, on busy main roads, railway lines, council estates opposite, that sort of thing - those properties will drop more in value than any other type of property, because the down factor weighs more heavily in the down market. However! However, at the beginning, at the base of the market, when it's dropped to its lowest, those are the best ones to buy, because they always rise faster. Although they'll always be cheaper than the property with the non-down factor, the gap between the two values will be a lot closer in a higher market. So those are good to buy.

DF: And to any buyers out there who are looking to pick up a bargain at the moment, what would you advise them to do?

JW: There are deals out there. In markets like this there's no substitute for square feet. You want to buy as much property or as big a property as you can, for as cheaply as possible. Buy properties that you can improve on, that won't necessarily cost too much to improve, or properties that you can extend. The cost of extending remains relatively constant, unlike the value of a property. People have got to concentrate on getting themselves cash rich. They've got to start saving now, if they can. Draw back on everything, make their living costs an absolute minimum, think about what kind of car they drive, changing that, just cut back on everything, the type of food they eat, the lot. Save up the money, for the time when in maybe two, three, four years time, God knows when, but when the market will be right to re-invest in, and then come in - come in big time, and buy everything. Get yourself up to your eyeballs in property. But it's certainly not now.

DF: Well, John, this has been an excellent interview, and I maintain my statement that you're one of the few honest-talking estate agents out there, and it's been a real pleasure talking to you and thanks for being so frank.

JW: (laughs) you'll always get it straight from me, Dominic, you really will.

Edited by benj, 09 July 2008 - 11:17 AM.

"In our highly complicated credit economy where every part of the system is connected with every other, directly or indirectly, by contractual bonds, every disturbance at one point spreads at once to others. If some banks -- those nerve centers where innumerable strands of credit relations come together -- are involved and become bankrupt, a wave of pessimism is bound to come: as a secondary phenomenon a credit deflation is likely to be the consequence of the general distrust and nervousness." - Gottfried Haberler, 1932